Insights

Global Dividend Aristocrats Target Stocks with a Long-Term Track Record

  • Market sentiment continues to favour an economic recovery in 2021, as vaccination programs help support a pickup in business activity.
  • Companies are keen to renew their commitments on returning capital to shareholders through the dividend.
  •  A stable dividend strategy, such as the Global Dividend Aristocrats index tracked by SPDR® ETFs, aims to offer investors strong yield factor exposure through higher quality stocks from a diverse range of sectors.

 


Current Economic Landscape Favours Return to Dividend Strategies

The current economic sentiment provides a supportive case for dividend stocks based on recent earnings guidance, analyst projections and general optimism toward a continued economic recovery. This environment could present an opportunity for global equity investors using UCITS ETFs to return to dividend strategies, following momentum seen in other recovery plays. Global equity investors heard a number of positive themes this earnings season, which helped shape the future estimates on forward dividends.

The S&P® Global Dividend Aristocrats Quality Income Index (“Global Dividend Aristocrats”) selects high yielding stocks that have a long-term track record (at least 10 consecutive years) of maintaining or raising the total dividend per share amount every year. By adding Global Dividend Aristocrats to the portfolio, investors can increase exposure to stocks forecasting increasing or stable dividend yields, both in terms of nominal stock count (Figure 1) and overall portfolio exposure (Figure 2).

Figure 1: Total Number of Stocks by Forecast Action
 

Source: Bloomberg Finance L.P., as of 19 April 2021. The above targets are estimates based on certain assumptions and analysis made by Bloomberg Finance L.P.. There is no guarantee that the estimates will be achieved.

Figure 2: Total Portfolio Exposure by Forecast Action

Source: Bloomberg Finance L.P., as of 19 April 2021.The above targets are estimates based on certain assumptions and analysis made by Bloomberg Finance L.P.. There is no guarantee that the estimates will be achieved.

The Global Dividend Aristocrats index uses a flexible approach to targeting quality income, which allows the strategy to go ‘wherever it needs’ to find long-term stable dividends. As a result, the index will often tilt toward sectors such as Financials, Utilities, Consumer Staples and Real Estate. Each of these sectors presents opportunities for investors to target stocks that are both increasing and maintaining short-term dividend yields (Figure 3).

Figure 3: Total Portfolio Exposure by Forecast Action and Sector
 

Source: Bloomberg Finance L.P. as of 19 April 2021. The X-axis represents portfolio weight. The data labels are stock counts for each forecast category. The above targets are estimates based on certain assumptions and analysis made by Bloomberg Finance L.P.. There is no guarantee that the estimates will be achieved.

How to Play this Theme

In one simple trade, investors who are optimistic about the economic momentum behind dividend stocks and who are seeking to add yield factor exposure to the portfolio can trade the SPDR® S&P® Global Dividend Aristocrats UCITS ETF. The S&P® Global Dividend Aristocrats Quality Income Index offers an indicative yield premium of 3%1  over the MSCI ACWI Index as of April 2021. To learn more about this ETF, and to view full performance history, please visit the fund page .

To learn more about Q1 factor performance, ETF flows, institutional style flows and holdings, as well as fundamentals and correlations, we invite you to read out Q2 Smart Beta Compass .

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Flows


European-Domiciled ETP Segment Flows (Top/Bottom 5, $mn)

European-Domiciled ETP Asset Category Flows ($mn)

Source: Bloomberg Finance L.P., for the period 22-29 April 2021. Flows are as of date indicated and should not be relied upon as current thereafter. This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future